FDI in multi-brand retail comes into effect
Showing resolve for reforms, the government today notified its decision to allow global retail giants like Walmart to open stores in India, on a day several political parties called Bharat Bandh to protest against the policy.business Updated: Sep 20, 2012 21:17 IST
Showing resolve for reforms, the government today notified its decision to allow global retail giants like Walmart to open stores in India, on a day several political parties called Bharat Bandh to protest against the policy.
With this notification, multinational retailers can invest up to 51 per cent to open stores in 10 states and UTs which, till date, have agreed to implement the decision.
"51 per cent FDI in multi-brand retailing, in all products, will be permitted ...," a notification by the Department of Industrial Policy and Promotion (DIPP) said. It said the decision will take immediate effect.
The DIPP also operationalised September 14 Cabinet decisions to relax the sourcing norms for foreign retailers investing beyond 51 per cent in single-brand retail and allow 49 per cent FDI by foreign airlies in the domestic carriers.
Besides, the decisions on permitting 49 per cent FDI in power exchanges and increase in foreign equity cap from 49 per cent to 74 per cent in the service providers like DTH in broadcasting sector have also been notified.
In the most controversial area of FDI in multi-brand, the the DIPP said the State Governments and UTs would be free to take their own decisions.
"Therefore, retail sales outlets may be set up in those StatesUTs which have agreed, or agree in future, to allow FDI in MBRT (multi-brand retail trading) under this policy".
Minimum amount to be brought in by the foreign investor would be USD 100 million and outlets may be set up only in cities with a population of more than 10 lakh.
At least 50 per cent of FDI should be invested in 'back-end infrastructure' within three years of the first tranche.
To protest against the government's decision, NDA, Left and SP called Bharat Bandh. The parties were also protesting against the diesel price hike and cap on subsidised LPG.
While the government had taken the decision to open the multi-brand retail sector in November last year, it could not implement the same in the face of stiff opposition from its ally Trinamool Congress.
Only 10 states and UTs have so far conveyed to the Centre their agreement to open FDI in the multi-brand retail. These are, Andhra Pradesh, Assam, Delhi, Haryana, Jammu & Kashmir, Maharashtra, Manipur, Rajasthan, Uttarakhand, Daman & Diu and Dadra and Nagar Haveli.
The major domestic retailers welcomed the decision.
Future Group CEO Kishore Biyani said "Finally FDI is here. So that is a very good news. There is no threat to us from foreign retailers."
Aditya Birla Group, Business Director (Apparel & Retail Business) Pranab Barua said, "We have to still wait and watch what happens at the state level. This will help the sector."
The DIPP notification further said companies with FDI in multi-brand retail will not be allowed online trading.
FDI will also not be allowed in lottery business, chit funds, manufacturing of cigars and cigarettes and transport (other than Mass Rapid Transport Systems).
At least 30 per cent of the value of procurement of manufactured and processed products should be sourced from 'small industries' which have a total investment in plant and machinery not exceeding USD 1 million, the DIPP said.
At present Walmart has a 50:50 cash and carry joint venture with Bharti Group, while Carrefour runs wholesale stores. Tesco, on the other hand has a tie-up with the Tata group and supports the Indian firm in the running of Star Bazaar chain of retail outlets.
Diluting the earlier norms in the single-brand retail, the DIPP said the 30 per cent sourcing by the global firms "will be done from India, preferably from MSMEs, village and cottage industries, artisans and craftsmen, in all sectors".
Swedish retailer IKEA, which planned to invest Rs 10,500 crore in India, had sought relaxations in this regard.